Alto Moderate Aggressive Canada Focus Portfolio

Transcription

1 Alto Moderate Aggressive Canada Focus Portfolio Interim Financial Report FOR THE SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2016 The accompanying interim financial statements have not been reviewed by the external auditors of the Portfolio Fund. The external auditors will be auditing the annual financial statements of the Portfolio Fund as at March 31, 2017, in accordance with Canadian generally accepted auditing standards. Copyright Investors Group Inc Trademarks owned by IGM Financial Inc. and licensed to its subsidiary corporations.

2 INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2016 STATEMENTS OF FINANCIAL POSITION at September 30, 2016 (unaudited) with comparative figures at March 31, 2016 (in $ 000 except per security amounts) Assets Current assets: Sep. 30 Mar Non-derivative investments 169, ,196 Cash and cash equivalents - 1 Accrued interest receivable - - Dividends receivable - - Accounts receivable for securities issued - - Accounts receivable from the Manager - - Other assets - - Non-current assets: 169, ,197 Taxes recoverable - - Other assets Total assets 169, ,197 Liabilities Current liabilities: Bank indebtedness 2 - Accounts payable for securities redeemed 4 4 Distributions payable - - Accrued expenses and miscellaneous payables - - Taxes payable - - Other liabilities 4 2 Total liabilities 10 6 Net assets attributable to securityholders 169, ,191 STATEMENTS OF COMPREHENSIVE INCOME for the six-month periods ended September 30 (unaudited) (in $ 000 except per security amounts) Income: Gains (losses) on derivative and non-derivative investments: Dividends Interest income Net realized gain (loss) 2,064 4,091 Net unrealized gain (loss) 10,557 (11,749) Other - - Net gain (loss) on derivative and non-derivative investments 13,181 (6,807) Other - - Total income 13,181 (6,807) Expenses: Management fees 1,636 1,797 Distribution fees Management and Distribution fee rebates (2) (1) Service fees Service fee rebates (9) (9) Administration fees Trustee fees Independent Review Committee costs - - Other 3 - Expenses before amounts absorbed by Manager 2,109 2,315 Expenses absorbed by Manager - - Net expenses 2,109 2,315 Increase (decrease) in net assets attributable to securityholders from operations before tax 11,072 (9,122) Income tax paid (recovered) - - Increase (decrease) in net assets attributable to securityholders from operations 11,072 (9,122) Net assets attributable to securityholders per security per series Sep. 30 Mar. 31 Sep. 30 Mar Series A , ,877 Series B ,794 4,610 Series C ,200 6,068 Series Jdsc ,946 18,394 Series Jnl Series S ,402 4,163 Series U , ,191 Increase (decrease) in net assets attributable to securityholders from operations per security per series Series A 0.80 (0.66) 8,665 (7,194) Series B 0.79 (0.65) 313 (249) Series C 0.63 (0.51) 409 (334) Series Jdsc 0.72 (0.56) 1,318 (1,046) Series Jnl 0.72 (0.56) 57 (53) Series S 0.65 (0.50) 289 (223) Series U 0.80 (0.50) 21 (23) 11,072 (9,122) See accompanying notes.

3 INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2016 STATEMENTS OF CHANGES IN FINANCIAL POSITION for the six-month periods ended September 30 (unaudited) (in $ 000 except when stated) TOTAL SERIES A SERIES B SERIES C Net assets attributable to securityholders, beginning of period 163, , , ,385 4,610 5,292 6,068 7,352 Increase (decrease) in net assets attributable to securityholders resulting from: Operations 11,072 (9,122) 8,665 (7,194) 313 (249) 409 (334) Distributions: Income Capital gains Return of captial Management and Distribution fee rebates (2) (1) Service fee rebates (9) (9) (9) (9) Total distributions (11) (10) (9) (9) Security transactions: Proceeds from sale of securities 6,864 14,817 4,494 4, Proceeds from securities issued on merger Reinvested from distributions Payment on redemption of securities (11,947) (20,125) (9,363) (16,751) (581) (874) (320) (741) Total security transactions (5,072) (5,298) (4,869) (12,134) (129) (360) (268) (624) Increase (decrease) in assets attributable to securityholders 5,989 (14,430) 3,796 (19,328) 184 (609) 132 (967) Net assets attributable to securityholders, end of period 169, , , ,057 4,794 4,683 6,200 6,385 Increase (decrease) in securities (in thousands): Securities outstanding, beginning of period 11,043 11, Add (deduct): Securities sold Securities issued on merger Reinvested from distributions Securities redeemed (781) (1,292) (49) (68) (34) (73) Securities outstanding, end of period 10,637 10, SERIES Jdsc SERIES Jnl SERIES S SERIES U Net assets attributable to securityholders, beginning of period 18,394 12, ,163 4, Increase (decrease) in net assets attributable to securityholders resulting from: Operations 1,318 (1,046) 57 (53) 289 (223) 21 (23) Distributions: Income Capital gains Return of captial Management and Distribution fee rebates (2) (1) Service fee rebates Total distributions (2) (1) Security transactions: Proceeds from sale of securities 1,534 8, Proceeds from securities issued on merger Reinvested from distributions Payment on redemption of securities (1,300) (1,458) (116) (132) (50) (114) (217) (55) Total security transactions 236 7,493 (71) 267 (50) (95) Increase (decrease) in assets attributable to securityholders 1,552 6,446 (14) (318) Net assets attributable to securityholders, end of period 19,946 19, ,402 4, Increase (decrease) in securities (in thousands): Securities outstanding, beginning of period 1,804 1, Add (deduct): Securities sold Securities issued on merger Reinvested from distributions Securities redeemed (124) (129) (11) (12) (5) (11) (21) (5) Securities outstanding, end of period 1,828 1, See accompanying notes.

4 INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2016 STATEMENTS OF CASH FLOWS for the six-month periods ended September 30 (unaudited) (in $ 000 except when stated) Cash flows from operating activities Increase (decrease) in net assets attributable to securityholders from operations 11,072 (9,122) Less non-cash impact of: Net realized (gain) loss (2,064) (4,091) Change in net unrealized (gain) loss (10,557) 11,749 Distributions received from Underlying Funds (559) (851) Adjustments for: Proceeds from sale and maturity of investments 37,405 48,737 Purchases of investments (30,219) (41,240) (Increase) decrease in accounts receivable and other assets - 1 Increase (decrease) in accounts payable and other liabilities 2 - Net cash provided by (used in) operating activities 5,080 5,183 Cash flows from financing activities: Proceeds from securities issued 6,864 14,822 Proceeds from securities issued on merger - - Payments on redemption of securities (11,947) (20,005) Distributions paid net of reinvestments - - Net cash provided by (used in) financing activities (5,083) (5,183) Increase (decrease) in cash and cash equivalents (3) - Cash and cash equivalents at beginning of period 1 1 Effect of exchange rate fluctuations on cash and cash equivalents - - Cash and cash equivalents, end of period (2) 1 Cash - 1 Cash equivalents - - Bank indebtedness (2) - Supplementary disclosures on cash flow from operating activities: (2) 1 Dividends received net of withholding taxes Interest received net of withholding taxes Interest paid - - See accompanying notes.

5 INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2016 SCHEDULE OF INVESTMENTS as at September 30, 2016 (unaudited) No. of Units, Fair Shares, or Cost Value Par Value ($ 000) ($ 000) MUTUAL FUNDS IG Mackenzie Canadian Equity Growth Fund Series P 1,396,668 24,449 25,381 IG Mackenzie Income Fund Series P 1,370,863 16,336 16,860 IG Mackenzie Ivy European Fund Series P 435,028 7,528 8,432 IG Putnam U.S. Growth Fund Series P 374,819 7,527 8,506 Investors Canadian Growth Fund Series P 1,917,712 22,518 25,384 Investors Canadian High Yield Income Fund Series P 844,629 8,341 8,454 Investors Canadian Large Cap Value Fund Series P 1,739,800 22,419 25,404 Investors Canadian Small Cap Fund Series P 510,597 7,897 8,425 Investors European Mid-Cap Equity Fund Series F 544,059 7,339 8,485 Investors Mortgage and Short Term Income Fund Series P 774,344 8,505 8,458 Investors Pan Asian Equity Fund Series F 630,050 9,249 10,080 Investors U.S. Large Cap Value Fund Series P 660,930 13,010 15,321 TOTAL NON-DERIVATIVE INVESTMENTS 155, ,190 Net Assets (see asset composition): Total non-derivative investments 169,190 Cash and cash equivalents (2) Other net assets (liabilities) (8) 169,180 Schedule of Asset Composition as at September 30, 2016 (unaudited) PORTFOLIO ALLOCATION % of net assets Canadian Equity Funds 50.0 Foreign Equity Funds 30.0 Income Funds 20.0 Total as at March 31, 2016 PORTFOLIO ALLOCATION % of net assets Canadian Equity Funds 50.0 Foreign Equity Funds 30.0 Income Funds 20.0 Total 100.0

6 NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, ORGANIZATION OF THE PORTFOLIO FUND, FISCAL PERIODS AND GENERAL INFORMATION (a) Organization of the Portfolio Fund The Portfolio Fund is organized as an open-ended mutual fund trust established under the laws of Manitoba and governed by a Declaration of Trust. The address of the Portfolio Fund s registered office is 447 Portage Avenue, Winnipeg, Manitoba, Canada. The Portfolio Fund is authorized to issue an unlimited number of securities of multiple series. If issued, Series DC, P and S securities are only available for purchase by other Investors Group Funds or other qualified investors. All series generally share in the operations of the Portfolio Fund on a pro rata basis except for items that can be specifically attributed to one or more series. Distributions for each series may vary, partly due to the differences in expenses between the series. (b) Financial Periods The Statements of Financial Position are presented as at September 30, 2016 and March 31, The Statements of Comprehensive Income, Statements of Changes in Financial Position and Statements of Cash Flows are for the six-month periods ended September 30, 2016 and The Schedule of Investments is presented as at September 30, Where a Portfolio Fund or series of a Portfolio Fund was established during either period, the information for the Portfolio Fund or series is provided from inception date. (c) General information I.G. Investment Management, Ltd. is the Manager and Trustee of the Portfolio Fund. The Portfolio Fund is distributed by Investors Group Financial Services Inc. and Investors Group Securities Inc. (collectively, the Distributors). These companies are, indirectly, wholly owned subsidiaries of IGM Financial Inc. Investments of the Portfolio Fund consist of securities of other Investors Group Funds (called the Underlying Funds). The Underlying Funds have the same Manager as the Portfolio Fund. The Manager will purchase or redeem securities of the Underlying Funds based entirely on the requirements of the Portfolio Fund. All transactions in the Underlying Funds are executed based on the net asset value per security on each transaction day. No commissions or other fees are paid by either the Portfolio Fund or Underlying Funds in relation to the purchase and redemption of securities. 2. BASIS OF PREPARATION AND PRESENTATION These unaudited interim financial statements (financial statements) have been prepared in accordance with International Financial Reporting Standards (IFRS), including International Accounting Standard 34 Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB). These financial statements were prepared using the same accounting policies, critical judgments and estimates as applied in the Portfolio Fund s most recent audited annual financial statements for the year ended March 31, A summary of the Portfolio Fund s significant accounting policies under IFRS is presented in Note 3. These financial statements are presented in Canadian dollars, which is the Portfolio Fund s functional currency, and rounded to the nearest thousand unless otherwise indicated. These financial statements are prepared on a going concern basis using the historical cost basis, except for financial assets and liabilities that have been measured at fair value. These financial statements were authorized for issue by the Manager on November 10, Standards issued but not yet effective for the current accounting year are described in Note SIGNIFICANT ACCOUNTING POLICIES (a) Financial Instruments Investments are comprised of securities of the Underlying Funds. The Portfolio Fund classifies and measures financial instruments in accordance with IFRS 9 Financial Instruments (IFRS 9). Upon initial recognition, financial instruments are classified as fair value through profit or loss (FVTPL). All financial assets and liabilities are recognized in the Statement of Financial Position when the Portfolio Fund becomes a party to the contractual requirements of the instrument. Financial instruments are derecognized when the right to receive cash flows from the instrument has expired or the Portfolio Fund has transferred substantially all risks and rewards of ownership. As such, investment purchase and sale transactions are recorded as of the trade date. Financial instruments are subsequently measured as FVTPL with changes in fair value recognized in the Statement of Comprehensive Income. The cost of investments (cost) is based on the weighted average cost of investments and excludes commissions and other portfolio transaction costs, which are separately reported in the Statement of Comprehensive Income. Realized gains and losses on disposition are determined based on the cost of investments. Gains and losses arising from changes in the fair value of the investments are included in the Statement of Comprehensive Income for the period in which they arise. The Portfolio Fund has concluded that the Underlying Funds in which it invests do not meet the definition of structured entities and are presented in the Schedule of Investments at fair value which represents the Portfolio Fund s maximum exposure on these investments. (b) Fair value measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Portfolio Fund determines fair value for securities in an Underlying Fund as the net asset value per security calculated in accordance with the offering documents of the Underlying Fund. These fair value measurements are classified as Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities) in accordance with IFRS 13 Fair Value Measurement. There were no transfers in or out of Level 1 during the periods. (c) Cash and cash equivalents Cash and cash equivalents includes cash on deposit with banks and short term investments that are readily convertible to cash, are subject to an insignificant risk of changes in value, and are used by the Portfolio Fund in the management of short-term commitments. Cash and cash equivalents are reported at fair value which closely approximates their amortized cost due to their nature of being highly liquid and having short terms to maturity. Bank overdraft positions are presented as bank indebtedness in current liabilities in the Statement of Financial Position. (d) Currency All amounts are expressed in Canadian dollars. The Portfolio Fund does not have any significant transactions or balances in foreign currencies. (e) Income recognition (f) Income from investments is recognized on an accrual basis. Distributions or dividends from Underlying Funds are recognized at the time the Underlying Funds net assets value is calculated on an ex-dividend basis and are recognized based on their nature, such as Canadian dividend, capital gains and other income, and included on the Statement of Comprehensive income in the applicable line items. Redeemable securities The Portfolio Fund s redeemable securities entitle securityholders the right to redeem their interest in the Portfolio Fund for cash equal to their proportionate share of the net asset value of the Portfolio Fund, amongst other contractual rights. These redeemable securities involve multiple contractual obligations on the part of the Portfolio Fund and therefore meet the criteria for classification as financial liabilities. The Portfolio Fund s obligation for net assets attributable to securityholders is measured at FVTPL, with fair value being the redemption amount as of the reporting date. (g) Increase (decrease) in net assets attributable to securityholders from operations Increase (decrease) in net assets attributable to securityholders from operations per security for a series in the Statement of Comprehensive Income represents the weighted average increase (decrease) in net assets attributable to securityholders from operations for the series, per security outstanding during the period. (h) Offsetting (i) (j) Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. In the normal course of business, the Portfolio Fund enters into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the Statement of Financial Position but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the contracts. Note 11 presents the amounts, if any, that are subject to master netting arrangements or other similar agreements and the net impact to the Statements of Financial Position if all such rights were exercised. Mergers The Portfolio Fund applies the acquisition method of accounting for Portfolio Fund mergers. Under this method, one of the Portfolio Funds in each merger is identified as the acquiring Portfolio Fund, and is referred to as the Continuing Portfolio Fund, and the other Portfolio Fund involved in the merger is referred to as the Terminated Portfolio Fund. This identification is based on the comparison of the relative net asset values of the Portfolio Funds as well as consideration of the continuation of such aspects of the Continuing Portfolio Fund as: investment advisors; investment objectives and practices; type of portfolio securities; and management fees and expenses. Comparative figures Certain prior period comparative amounts have been reclassified to conform to current presentation. (k) Future accounting changes Disclosure Initiative Amendments to IAS 1 Presentation of Financial Statements became effective for annual periods beginning on or after January 1, The Portfolio Fund has determined there are no material implications to the Portfolio Fund s financial statements arising from the amendments.

7 NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, USE OF ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in accordance with IFRS requires judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses during the period. However, existing circumstances and assumptions may change due to market changes or circumstances arising beyond the control of the Portfolio Fund. Such changes are reflected in the assumptions when they occur. The following discusses the most significant accounting judgments and estimates made in preparing the financial statements: (a) Functional Currency The Portfolio Fund s functional and presentation currency is the Canadian dollar, which is the currency considered to most faithfully represent the economic effects of the Portfolio Fund s underlying transactions, events and conditions taking into consideration the manner in which securities are issued and redeemed and how returns and performance by the Portfolio Fund are measured. (b) Classification of financial instruments In classifying and measuring financial instruments held by the Portfolio Fund, the Manager is required to make significant judgments in determining the most appropriate classification in accordance with IFRS 9. The Manager has assessed the Portfolio Fund s business model, the manner in which all financial assets and financial liabilities are managed and performance evaluated as a group on a fair value basis, and concluded that FVTPL in accordance with IFRS 9 provides the most appropriate measurement and presentation of the Portfolio Fund s financial assets and financial liabilities. (c) Structured entities In determining whether unlisted open-ended investment funds in which the Portfolio Fund invests, but that it does not consolidate, meet the definition of a structured entity, the Manager is required to make significant judgments about whether the Underlying Funds have the typical characteristics of a structured entity. The Manager has assessed the characteristics of the Underlying Funds and has concluded that they do not meet the definition of a structured entity because the Portfolio Fund does not have contracts or financing arrangements with the Underlying Funds and does not have an ability to influence the activities of the Underlying Funds or the return it receives from its investment. 5. MANAGEMENT FEES AND OTHER EXPENSES (a) Each series of the Portfolio Fund will incur expenses that can be specifically attributed to that series. Common expenses of the Portfolio Fund are allocated across the series of the Portfolio Fund on a pro rata basis. (b) The Manager provides or arranges for the provision of investment and advisory services for a management fee. See Note 11 for the annual rates paid (as a percent of average assets) by the Portfolio Fund. (c) The Portfolio Fund pays the Manager an administration fee and in return the Manager will bear the operating expenses of the Portfolio Fund, other than certain specified costs. See Note 11 for the annual rates paid (as a percent of average assets) by the Portfolio Fund. Other costs of the Portfolio Fund include taxes (including but not limited to GST/HST and income tax), interest and borrowing costs, and Independent Review Committee (IRC) costs. (d) The Portfolio Fund may pay the Distributors a service fee to compensate them for providing or arranging for the provision of services to the Portfolio Fund. A portion of the service fee related to Series C and Tc is rebated by the Distributors to the Portfolio Fund on a quarterly basis as outlined in the Portfolio Fund s Prospectus. The rebate is distributed as a capital distribution to eligible securityholders and is reinvested in additional Series C or Tc securities of the Portfolio Fund or another distributing fund held by the securityholder. See Note 11 for the annual rates paid (as a percent of average assets) by the Portfolio Fund. The Portfolio Fund may also pay the Distributor an annual fee in recognition of certain distribution services provided by the Distributors. See Note 11 for the annual rates paid (as a percentage of average assets) by the Portfolio Fund. (e) The Trustee is responsible for overall direction and management of the affairs of the Portfolio Fund. See Note 11 for the annual rates paid (as a percent of average assets) to the Trustee by the Portfolio Fund. (f) An advisory fee is charged by the Distributors for investment advice and administrative services related to Series U and Tu, if issued. The advisory fee is payable monthly directly by investors in Series U and Tu, and not by the Portfolio Fund. (g) GST/HST paid by the Portfolio Fund on its expenses is not recoverable. In these financial statements, reference to GST/HST includes QST (Québec sales tax), as applicable. (h) Other expenses are comprised of interest and borrowing charges and other miscellaneous expenses. (i) The Manager may, at its discretion, pay certain expenses of the Portfolio Fund so the Portfolio Fund s performance remains competitive; however, there is no assurance that this will occur in the future. Any expenses absorbed by the Manager during the periods have been identified in the Statements of Comprehensive Income. 6. INCOME TAXES The Portfolio Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada) and, accordingly, is subject to tax on its income including net realized capital gains, which is not paid or payable to its securityholders. The Portfolio Fund maintains a December year-end for tax purposes. The Portfolio Fund will distribute sufficient amounts from net income for tax purposes, as required, so that the Portfolio Fund will not pay income taxes other than refundable tax on capital gains, if applicable. See Note 11 for the losses that were available to offset future income for tax purposes as at the last taxation year-end. The net capital losses can be carried forward indefinitely to reduce future realized capital gains. The non-capital losses may be utilized to reduce taxable income of future years and expire in December of the years indicated. 7. GUARANTEES AND INDEMNITIES Agreements between the individual members of the Portfolio Fund s IRC and the Trustee, on behalf of the Portfolio Fund, provides for the indemnification of each IRC member by the Portfolio Fund from and against liabilities and costs in respect of any action or suit against the member by reason of being or having been a member of the IRC, provided that the member acted honestly and in good faith with a view to the best interest of the Portfolio Fund, or, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, that they had reasonable grounds for believing that his/her conduct was lawful. No claims with respect to such occurrences have been made and, as such, no amount has been recorded in these financial statements with respect to these indemnifications. 8. CAPITAL MANAGEMENT The capital structure of the Portfolio Fund consists of redeemable securities in multiple series. The net capital received by the Portfolio Fund is managed in accordance with the investment objective and strategies of the Portfolio Fund and to maintain adequate liquidity to meet securityholder redemption requests. The Portfolio Fund is not subject to externally imposed capital requirements and has no legal restrictions on the issue or redemption of securities beyond those included in the Portfolio Fund s prospectus. Securities issued, reinvested and redeemed during the periods are reflected in the Statements of Changes in Financial Position. 9. FINANCIAL INSTRUMENT RISK The Portfolio Fund s investment activities expose it to a variety of financial risks. The Schedule of Investments presents the Underlying Funds held by the Portfolio Fund and the related indirect exposure to financial instrument risk, as at the end of the period. (a) Risk Management The Portfolio Fund employs an investment strategy whereby investments in Underlying Funds are based on target asset weightings. The target weightings allocated to each Underlying Fund and the selection of Underlying Funds are based on several factors, including impact to the Portfolio Fund s volatility and asset class diversification. To assist with managing risk, the Manager also maintains a governance structure that oversees the Portfolio Fund s investment activities and monitors compliance with the Portfolio Fund s stated investment strategy and securities regulations. Financial statements for the Underlying Funds, which include discussions about their respective risk exposures, are available upon request. See Note 10 which describes how to obtain further information. (b) Liquidity risk The Portfolio Fund is exposed to daily cash redemptions of redeemable securities. Except for Investors Real Property Fund, all investments in Underlying Funds are redeemable daily upon demand. Redemptions from Investors Real Property Fund can only be executed twice a month. In addition, the Portfolio Fund also has the ability to borrow up to 5% of its net assets for the purposes of funding redemptions. (c) Currency risk Currency risk is the risk that financial instruments which are denominated or exchanged in a currency other than the Canadian dollar, which is the Portfolio Fund s functional currency, will fluctuate due to changes in exchange rates. Generally, foreign denominated investments increase in value when the value of the Canadian dollar (relative to foreign currencies) falls. Conversely, when the value of the Canadian dollar rises relative to foreign currencies, the values of foreign denominated investments fall. The Portfolio Fund s investments in all Underlying Funds are denominated in Canadian dollars. However, the Underlying Funds are exposed to currency risk to the extent that their investments are denominated or traded in a foreign currency. Note 11 indicates the Portfolio Fund s sensitivity, if any, to a 5% movement in foreign currencies, relative to the Canadian dollar, as a result of its indirect exposure to foreign currencies through investment in the Underlying Funds. (d) Interest rate risk Interest rate risk arises on interest-bearing financial instruments such as bonds. The Portfolio Fund does not directly hold any interest-bearing financial instruments other than a nominal amount of cash and short-term investments. The Portfolio Fund is indirectly exposed to the risk that the value of interest-bearing financial instruments held by the Underlying Funds will fluctuate due to changes in the prevailing levels of market interest rates. Generally, these securities increase in value when interest rates fall and decrease in value when interest rates rise. Note 11 indicates the Portfolio Fund s sensitivity, if any, to a 1% movement in interest rates, as a result of its indirect exposure through investment in the Underlying Funds.

8 NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, FINANCIAL INSTRUMENT RISK (continued) (e) Credit risk (f) Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Portfolio Fund. The Portfolio Fund has no significant direct exposure to credit risk. Indirect exposure to credit risk may arise from fixed-income securities, such as bonds, held by Underlying Funds. The fair value of fixed-income securities held by the Underlying Funds includes consideration of the creditworthiness of the issuer based on DBRS, Standard & Poor s or Moody s ratings. The carrying amount of investments represents the maximum credit risk exposure. The carrying amount of other assets of the Portfolio Fund also represents the maximum credit risk exposure, as they will be settled in the short term. Other price risk Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk), whether caused by factors specific to an individual investment, its issuer or other factors affecting all instruments traded in a market or market segment. All investments present a risk of loss of capital. For the investments held by the Portfolio Fund, maximum risk of loss is equivalent to their fair value. The Manager moderates this risk through a careful selection of Underlying Funds within the parameters of the investment strategy. For the Portfolio Fund, the most significant exposure to other price risk, if any, arises from the Underlying Funds investments in equity securities and derivative contracts. Note 11 indicates the Portfolio Fund s sensitivity, if any, to a 10% movement in the prices of equity securities, as a result of its indirect exposure through investment in the Underlying Funds. In addition, if the Portfolio Fund invests in Investors Real Property Fund, the Portfolio Fund is exposed to the risk that the value of the Underlying Fund could change as a result of changes in the valuation of real properties. Valuations of real properties are sensitive to changes in capitalization rates. Note 11 also indicates the Portfolio Fund s sensitivity, if any, to a 25 basis point change in the weighted average capitalization rate. 10. OTHER INFORMATION (a) Abbreviations Foreign currencies, if any, are presented in these financial statements using the following abbreviated currency codes: Currency Code Description Currency Code Description AUD Australian dollars MXN Mexican peso BRL Brazilian real MYR Malaysian ringgit CAD Canadian dollars NGN Nigerian naira CHF Swiss franc NOK Norwegian krona CKZ Czech koruna NTD New Taiwan dollar CLP Chilean peso NZD New Zealand dollars CNY Chinese yuan PEN Peruvian nuevo sol COP Colombian peso PHP Philippine peso DKK Danish krone PLN Polish zloty EUR Euro RON Romanian leu GBP United Kingdom pounds RUB Russian ruble HKD Hong Kong dollars SEK Swedish krona HUF Hungarian forint SGD Singapore dollars IDR Indonesian rupiah THB Thailand baht ILS Israeli sheqel TRL Turkish lira INR Indian rupee USD United States dollars JPY Japanese yen ZAR South African rand KOR South Korean won (b) Additional information available A copy of the Portfolio Fund s current Simplified Prospectus, Annual Information Form and/or Management Report of Fund Performance, will be provided, without charge, by writing to: Investors Group Financial Services Inc., 447 Portage Avenue, Winnipeg, Manitoba, R3B 3H5 or, in Québec, 2001, Robert-Bourassa Boulevard, Bureau 2000, Montréal, Québec, H3A 2A6, or by calling toll-free (in Québec ).

9 NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, PORTFOLIO FUND SPECIFIC INFORMATION (a) Portfolio Fund and series information In August 2015, the Manager made the following adjustments to the investments held by the Portfolio Fund: Add: Investors Mortgage and Short Term Income Fund (+5%) Increase: IG Mackenzie Canadian Equity Growth Fund (+5%) Decrease: IG Mackenzie Income Fund (-5%) Investors Canadian Small Cap Fund (-5%) Effective January 1, 2017, the annual service fee rate for Series B and Jnl will be decreased by 0.080% and the management fee rate for Series U will be decreased by 0.073%. After December 31, 2016, the deferred sales charge (DSC) purchase option of the Portfolio Fund will be closed to all new investments, but will continue to be available for pre-authorized contribution plans established before January 1, 2017 until on or about June 30, DSC fees will not apply to purchases under pre-authorized contribution arrangements after December 31, For Series A and Jdsc, the DSC purchase option will still be available for reinvested distributions and investments through switches from series of the Portfolio Fund and other Investors Group Funds held under the DSC option. For Series C, the DSC purchase option will still be available for reinvested distributions and investments through switches from Series C or Tc of other Investors Group Funds held under the DSC option. Date Deferred operations sales Management Distribution Service Administration Trustee Series commenced 1 charge (%) fee (%) fee (%) fee (%) fee (%) fee (%) Series A n/a up to Series B n/a Series C July 7, 2006 up to Series Jdsc July 12, 2013 up to Series Jnl July 12, Series S October 2, Series U July 12, If within 10½ years. (b) Income tax losses ($ 000) Total Total Expiration year for non-capital losses capital loss non-capital loss (c) Financial instrument risk i) Currency risk ii) As at September 30, 2016, had the Canadian dollar strengthened or weakened by 5% relative to all foreign currencies, all other variables held constant, net assets would have decreased or increased, respectively, by approximately $3,334,000 or 2.0% of total net assets (March 31, 2016 approximately $3,566,000 or 2.2%). In practice, the actual trading results may differ and the difference could be material. Interest rate risk As at September 30, 2016, had prevailing interest rates increased or decreased by 1%, assuming a parallel shift in the yield curve, all other variables held constant, net assets would have decreased or increased, respectively, by approximately $1,681,000 or 1.0% of total net assets (March 31, 2016 approximately $1,809,000 or 1.1%). The Portfolio Fund s sensitivity to interest rate changes was estimated using the weighted average duration of the Underlying Funds bond portfolios and a valuation model which estimates the impact to the fair value of the Underlying Funds mortgages based on changes in prevailing interest rates in a manner consistent with the valuation policy for mortgages. In practice, the actual trading results may differ and the difference could be material. iii) Other price risk As at September 30, 2016, had the prices on the respective stock exchanges for the equity securities held by the Underlying Funds increased or decreased by 10%, all other variables held constant, net assets would have increased or decreased, respectively, by approximately $12,991,000 or 7.7% of total net assets (March 31, 2016 approximately $12,355,000 or 7.6%). In practice, the actual trading results may differ and the difference could be material. (d) Manager s investment in the Portfolio Fund The securities held by the Manager were as follows: as at September 30, 2016 as at March 31, 2016 No. of Fair Value No. of Fair Value securities ($ 000) securities ($ 000) Series U

10 Memo